Appeal from the Circuit Court of Cook County. Nos. 87 CH 6706 and 88 CH 337 (Consolidated) The Honorable Stephen A. Schiller, Judge Presiding.
The opinion of the court was delivered by: Justice Tully
Plaintiffs, Gretchen Regnery, Verla Regnery, Lynn Regnery, Elisabeth B. Regnery, William H. Regnery II, Peter B. Regnery, Anne Regnery, David B. Regnery, Patrick Regnery and Bank of America N.T. and S.A. (fomerly Security Pacific Bank), brought this action in the circuit court of Cook County against defendants, David R. Meyers and Frederick C. Meyers (hereinafter David and Frederick M., or collectively the Meyers), seeking damages for breach of fiduciary duty. The trial court found that David breached his fiduciary duties which he owed to plaintiffs and that Frederick M. induced, participated in and accepted benefits from such breaches. On appeal, this court affirmed in part and reversed in part and remanded with directions.
On remand, the circuit court entered orders allowing certain parties to intervene and allocating plaintiffs' attorney fees. It is from those orders that plaintiffs and other parties now appeal and certain intervenors cross-appeal.
For the reasons which follow, we affirm, in part, and reverse, in part, the orders of the circuit court.
Joanna Western Mills Company (hereinafter Joanna) was a family-owned business, incorporated under the laws of Delaware, with its principal place of business in Chicago, Illinois. In 1980 and 1981, Joanna experienced financial difficulties and had a net operating loss of between two and $4 million over the course of the two years. In 1982 and 1983, Joanna's financial condition began improving. In 1983, Frederick Regnery began discussing with Henry Regnery the possibility of defendants Frederick and David Meyers, as executives, each purchasing 500 shares of Joanna at $500 per share. Henry agreed to support a sale of 300 shares to each at $500 per share. On September 13, 1983, at a board of directors meeting, Henry proposed the sale to the Meyers. The board passed a resolution to call a special stockholders meeting for purposes of allowing the sale to the Meyers. Notice of the special stockholders meeting was mailed to each stockholder of record. The notice informed the stockholders that the meeting was being held for the purpose of approving the sale of 600 shares of company stock to two executives of Joanna.
The special stockholders meeting was held on September 26, 1983. David, acting as trustee of the voting trust, voted the trust's 3,745 shares of stock, which constituted 71% of the company's total shares, in favor of the sale to the Meyers. The sale of stock to the Meyers was approved by the stockholders at the meeting by 98.8% of the total shares.
In July, 1987, Gretchen, Anne, Verla, Lynn and Peter filed the present action against defendants. A large percentage of Joanna shareholders who were named in a consolidated suit did not intervene in the present suit and did not assert their own separate claims against defendants. Following a bench trial, the circuit court found that defendant David Meyers breached his fiduciary duties owed to the minority stockholders of Joanna and that defendant Frederick Meyers induced those breaches, participated in them, knowingly accepted benefits from them and engaged in an intentional plan to act in concert with David. Moreover, the trial judge found that the Meyers received $4,359,900 in profit from David's breaches of fiduciary duties as well as $195,000 in dividends on the stock they wrongfully acquired. The trial court awarded plaintiffs, who were 35.71% stockholders in Joanna at the time of the breach, 35.71% of the amounts obtained by the Meyers.
On appeal, this court found that the circuit court erred in allowing defendants to retain all but 35.71% of the profits and dividends they received as a result of the breach of fiduciary duty. Upon remand, this court directed the circuit court to order that notice be given to all persons who were Joanna stockholders at the time of the sale of the 600 shares of stock to the defendants. Such notice was to provide that any parties wishing to intervene in the lawsuit file a statement of intent to intervene. This court directed the circuit court allow all parties to raise any objections they might have to any intervenor and to then determine which additional parties may rightfully join the lawsuit and to join such parties. This court further directed the circuit court to disgorge defendants of all profits and dividends obtained on the 600 shares of Joanna stock from September 1983 through October 1986, and to award both the original plaintiffs and those plaintiffs allowed to intervene their pro rata share of the profits and dividends. Finally, this court directed the circuit court to apply the equitable "common fund doctrine" for purposes of allocating plaintiffs' attorney fees among the original as well as the newly-added plaintiffs in this case. Regnery v. Meyers, 287 Ill. App. 3d 354 (1997).
Following this Court's Order, on January 20, 1998, the Meyers paid the principal amount of the judgment, $4,554,900, plus $734,424.01 in judgment interest and costs. On that same date, the plaintiffs were paid their 35.71% share of these monies, $1,626,555.00 in principal, plus $493,314.30 in interest, of which $211,986.93 was distributed in attorney fees to Robert Epsteen.
Upon remand, a number of persons who were Joanna stockholders at the time of the Sale moved to intervene in the circuit court pursuant to this Court's Order. Among those who moved to intervene were Alfred Regnery, individually and as Independent Executor of the Henry Regnery Estate, and Harris Bank, as Trustee for the Mary R. Meyers Residual Trust (the Trust). The Plaintiffs objected to the petitions of Alfred Regnery, the Henry Regnery Estate, and 40% of the Mary R. Meyers Residual Trust.
The Trust was originally established by the will of Mary R. Regnery in 1978. The will created a trust for the life benefit of Mary Regnery's husband. The Trust held 1,060 shares of Joanna stock as of September 26, 1983, the date of the Sale and the relevant date for intervention set by this Court's Order. The residuary estate was created upon the death of Mary Regnery's husband in 1989. The residuary estate created five nominally separate trusts in the names of Mary's five children, the Melissa Gibbs Trust, the Margery McGrew Trust, the David Meyers Trust, the Frederick Meyers Trust, and the Michael Meyers Trust. However, four of the five trusts, including those of David and Frederick Meyers, are managed as a common fund. All of Mary Regnery's five children have life interests in the net income of the Trust. The potential contingent beneficiaries who will come into possession of the Trust principal are the spouses of Mary Regnery's children, and/or Mary Regnery's grandchildren, and/or the spouses of those grandchildren, and/or charitable organizations. David and Frederick Meyers are co-trustees, with Harris Bank, of the Trust.
On August 2, 1999, the circuit court ordered that the Henry Regnery Estate and the Mary R. Meyers Residual Trust be permitted to intervene as plaintiffs in this case. The court denied Alfred Regnery's petition to intervene.
On November 26, 2001, the circuit court entered an order setting forth the method of final distribution of the disgorged monies, net of the earlier distribution to Plaintiffs. On January 15, 2002, the trial court entered an order setting out the exact distribution of the disgorged funds to all the plaintiffs and the amount of attorneys' fees. Included in the orders of distribution were Harris Bank, as Trustee for the Residuary Trust of Mary R. Meyers, and the Henry Regnery Estate. Robert Epsteen was awarded an additional $474,532.71 in attorneys' fees and Arvey, Hodes, Costello & Burman (AHCB) was awarded $67,718.57 in attorneys' fees.
ISSUES PRESENTED FOR REVIEW
On appeal, plaintiffs argue that the trial court erred when it: (1) allowed the Trust to intervene when David and Frederick Meyers are both beneficiaries and trustees; and (2) allowed the Estate of Henry Regnery to intervene. Plaintiffs also appeal the distribution order entered by the trial court contending that the formula for distribution of the judgment fund is not congruent with this court's mandate. Plaintiffs appeal the award of attorneys' fees to Epsteen as well as the award of fees to Arvey, Hodes, Costello & Burman. On cross-appeal, Alfred Regnery contends that the circuit court erred in denying his petition to intervene. Also on cross-appeal, the intervenors contend that the circuit court abused its discretion by ...